Mutual Funds vs. ETFs
Similar to mutual funds, exchange-traded funds (ETFs) are a diversified portfolio of individual securities (stocks and/or bonds). However, while ETFs are similar to mutual funds in that they are a diversified basket of individual securities, ETFs are different because of their structure and how they are bought and sold.
For example, ETFs get their name (Exchange-Traded Funds) because ETF shares are traded on the stock exchange like an individual stock. This is one example of the unique advantages ETFs have over mutual funds. These advantages collectively lead to significant cost reductions versus mutual funds.
The advantages can be summarized as follows: